DCPP Vs. RRSP - option to use for investment purposes

[Nir]

Hello,

Do the rules regarding using RRSP as down-payment for property investment/purchase purposes also apply to DCPP - Defined Contribution Pension Plan that some employees have through their workplace (DCPP is paid by some employers)?

If, for example, I have $20,000 in a DCPP can I somehow use that money to purchase real estate either as down-payment, a loan to myself or loan to another person like a family member? I`m not sure if the RRSP rules apply to DCPP as I heard with DCPP the money is locked in a corporate retirement fund(?)

Any advice on the topic would be highly appreciated.

Thanks,
Neil

 

[RobMacdonald]

Hi Neil,

The $20,000 that is eligible to be used from an RRSP as downpayment, is allowable as the RRSP is redeemable under the guidelines by CCRA. The $20,000 exemption limit is applicable to the purchase of a principal residence. There are tax considerations if you redeem any amount to purchase a rental property.

The DCPP, as you referred to, is probably very similar to most pension funds, LRSP`s or LIRA`s, whereby the funds are not redeemable until a certain age, so the funds cannot be used as a downpayment becaure they are inexcessible. So you will need to check with the rules regarding the DCPP to determine the eligibility for withdrawl.

One option you may have is to transfer the amount to a self directed RRSP. Then the funds can be used to finance second mortgages. Canadian Western Trust offers options that you may want to look into.

 

[KeenanTameling]

Because your DCPP is not accessable till 55, I do believe, your best bet is to go the self-directed route. Although you cannot access it you can control it. TD Waterhouse also offers self-directed accounts which accept 2nd Mortgages.

Keenan

 

[Rhill]

QUOTE (investmart @ Jan 13 2008, 12:07 AM) Hello,

Do the rules regarding using RRSP as down-payment for property investment/purchase purposes also apply to DCPP - Defined Contribution Pension Plan that some employees have through their workplace (DCPP is paid by some employers)?

If, for example, I have $20,000 in a DCPP can I somehow use that money to purchase real estate either as down-payment, a loan to myself or loan to another person like a family member? I`m not sure if the RRSP rules apply to DCPP as I heard with DCPP the money is locked in a corporate retirement fund(?)

Any advice on the topic would be highly appreciated.

Thanks,
Neil

 

[Rhill]